Tuesday, May 6, 2008

U.S. Stocks Rise as Energy Producers, Financial Companies Gain

By Elizabeth Stanton

May 6 (Bloomberg) -- U.S. stocks rose, sending the Standard & Poor's 500 Index to a four-month high, as loosened government restrictions on Fannie Mae sparked a rebound in financial shares and oil companies advanced on record crude prices.

Fannie Mae gained, helping financials erase a 1.9 percent decline, on a regulatory decision that will enable the biggest mortgage-finance company to buy more home loans. Anadarko Petroleum Corp. climbed to a record after profit exceeded estimates and crude topped $122 a barrel. Advanced Micro Devices Inc. rallied the most since January on speculation the second- biggest maker of computer processors may be split up.

The Standard & Poor's 500 Index added 10.77, or 0.8 percent, to 1,418.26. The Dow Jones Industrial Average increased 51.29, or 0.4 percent, to 13,020.83. The Nasdaq Composite Index jumped 19.19, or 0.8 percent, to 2,483.31. Two stocks gained for each that fell on the New York Stock Exchange.

``It continues the trend where people are speculating the worst is over in terms of the financial sector,'' said Mark Bronzo, a portfolio manager at Security Global Investors in Irvington, New York, which manages $11 billion. In financials today, ``the reversal is impressive,'' he said.

The S&P 500 erased yesterday's retreat and pared its 2008 decline to less than 3.4 percent. The benchmark for U.S. equities has rebounded more than 11 percent since a 19-month low on March 10 after first-quarter earnings topped estimates at 69 percent of companies that have reported results so far, according to data compiled by Bloomberg.

Fannie Mae Gains

Fannie Mae climbed 8.9 percent to $30.81 after dropping as much as 7.3 percent. Regulators said they will loosen restrictions on Fannie Mae's capital once the company has raised $6 billion in new funding. Fannie Mae, which owns or guarantees one of every five U.S. home loans, needs fresh capital to weather credit and derivative losses that rose fivefold to $8.9 billion.

The money raised will enable Fannie Mae to ``emerge from this crisis'' in a stronger position, Chief Executive Officer Daniel Mudd said.

Fannie Mae fell earlier after posting a first-quarter loss of $2.19 billion and cutting its dividend. Freddie Mac, Fannie Mae's smaller competitor, added $1.81 to $27.33.

`Heavy Lifting'

``Fannie Mae is doing the heavy lifting it needs to do to get back into operating shape,'' said Alan Gayle, senior investment strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $74 billion. ``To the extent you've got a strong player that has to do some fairly heavy lifting, it does make you wonder about how much work is going to have to be done by other firms.''

The S&P 500 Financials Index climbed 0.9 percent. Gains for the group were limited as Merrill Lynch & Co. said so-called Level 3 assets, the most difficult kind to value, climbed 70 percent in the first quarter and Legg Mason Inc. posted a bigger-than-expected loss after bailing out money-market funds hurt by subprime mortgages.

Merrill fell 0.1 percent to $51.35. Legg Mason lost 10 percent to $56.30 for the biggest drop in the S&P 500.

Anadarko rallied the most since February 2001, rising 9.4 percent to $74.53. The company reported 20 percent more first- quarter profit than analysts estimated, according to Bloomberg data, as record crude prices boosted results.

Energy companies gained the most among 10 groups in the S&P 500, adding 2.2 percent. Crude oil rose to a record $122.73 a barrel in New York on threats to supplies in Nigeria and Iraq and growing Asian fuel consumption. Supply shortfalls will probably send oil to between $150 and $200 a barrel within two years, Goldman Sachs Group Inc. analyst Arjun N. Murti said in a report.

Energy Rally

Exxon Mobil Corp., the largest U.S. energy company, rose 56 cents to $90.07. Chevron Corp., the second-biggest, added $1.25 to $96.87. Ten of the 36 energy companies in the S&P 500 rose to 52-week highs.

``Energy works even if commodity prices level off because the relative ability to generate profits here looks better than most other sectors,'' said Daniel Manion, manager of the $1.3 billion Sentinel Common Stock Fund in Montpelier, Vermont. The fund has outperformed 82 percent of similar funds over the past five years, according to Bloomberg data.

Advanced Micro rose 59 cents, or 9 percent, to $7.12 for the second-biggest gain in the S&P 500 after Anadarko. Investors are betting that the company will soon announce details of a plan to separate its manufacturing business from its chip design and development operations, according to CRT Capital Group analyst Ashok Kumar in San Francisco.

Beer Here

Molson Coors Brewing Co. climbed the most since Feb. 12, adding 7.4 percent to $57.10. The third-largest U.S. beer maker reported 13 percent more first-quarter profit than analysts estimated as sales in the U.S., Canada and U.K. grew.

About 1.23 billion shares changed hands on the NYSE, 18 percent less than the three-month daily average, according to Bloomberg data.

The Russell 2000 Index, a benchmark for companies with a median market value 95 percent smaller than the S&P 500's, gained 0.8 percent to 729.79. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, rose 0.8 percent to 14,308.52. Based on its advance, the value of stocks increased by $137.25 billion.

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